What's For Dinner?

Food Preparation Business Plan

Financial Plan

What's For Dinner expects strong sales, based on research into our target market, similar businesses in other parts of the country, lack of direct competition, and the experience, reputations, and know-how of its owners/managers. By steadily repaying our long-term loan and holding down costs, we will generate a net profit midway through the first year and increase net worth dramatically by year 3. Our major fixed expenses are payroll and rent.

8.1 Important Assumptions

The financial plan depends on important assumptions, most of which are shown in the following table as annual assumptions. The monthly assumptions are included in the appendices.

Three of the more important underlying assumptions are:

We assume a relatively strong economy, without major new recessions. Although an ailing economy would not allow us the growth that we anticipate, we believe that it would not drastically hurt the business because the service is economically feasible. The $175 session fee breaks down to $14.58 per meal - a deal hard to beat at even a fast-food restaurant for a family of four to six.

We assume that our market needs will be seasonal, with a decrease in sales during the summer months.

General Assumptions

Year 1

Year 2

Year 3

Plan Month

1

2

3

Current Interest Rate

7.00%

7.00%

7.00%

Long-term Interest Rate

7.00%

7.00%

7.00%

Tax Rate

24.00%

24.00%

24.00%

Other

0

0

0

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8.2 Break-even Analysis

The following chart and table summarize our break-even analysis. With fixed costs of $10,520 per month at the outset (to cover payroll and other operating costs), and variable costs (inventory) at 74% of sales, we need to bill $41,167 to cover our costs. We do not expect to reach break-even until the sixth month into the business operation.

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8.3 Projected Profit and Loss

What's For Dinner?'s projected profit and loss is shown in the following table, with sales increasing from $10K the first month to close to $1.4M by the third year. We will reach profitability in the middle of our first year.

We are projecting very conservatively regarding cost of sales and gross margin. Our costs of sales are based on grocery store prices, which will decrease once we are to consistently able to buy our food in larger quantities from a food distributor. This will significantly lower our cost of sales, and increase our gross margin more than in this projection. We prefer to project conservatively so that we make sure we have enough cash.

The Sales and Marketing Expenses vary from the food preparation industry norms. Our Sales and Marketing Expenses will be to consistently maintain our advertising and promotions, while our biggest marketing will be word of mouth from our customers. We are budgeting for a high level of service from our website hosting company and payment processor, since the website is a key component of our Sales and Marketing Strategies.

The detailed monthly projections are included in the appendices.

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8.4 Projected Cash Flow

The following cash flow projections show the annual amounts only. Cash flow projections are critical to our success. The monthly cash flow is shown in the illustration, with one bar representing the cash flow per month, and the other the monthly cash balance. The annual cash flow figures are included here and the more important detailed monthly numbers are included in the appendices.

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8.5 Projected Balance Sheet

The balance sheet in the following table shows managed but sufficient growth of net worth, and a sufficiently healthy financial position. Our negative net worth, due to borrowed capital for start-up, makes a significant increase by the second year, and becomes positive in year three. It is common for start-up businesses to have a negative net worth their first few years.

The monthly estimates are included in the appendices.

Pro Forma Balance Sheet

Year 1

Year 2

Year 3

Assets

Current Assets

Cash

$101,685

$82,187

$181,270

Inventory

$137,714

$172,142

$215,178

Other Current Assets

$8,000

$8,000

$8,000

Total Current Assets

$247,399

$262,329

$404,448

Long-term Assets

Long-term Assets

$42,000

$42,000

$42,000

Accumulated Depreciation

$4,200

$8,400

$12,600

Total Long-term Assets

$37,800

$33,600

$29,400

Total Assets

$285,199

$295,929

$433,848

Liabilities and Capital

Year 1

Year 2

Year 3

Current Liabilities

Accounts Payable

$148,189

$81,220

$99,942

Current Borrowing

$0

$0

$0

Other Current Liabilities

$0

$0

$0

Subtotal Current Liabilities

$148,189

$81,220

$99,942

Long-term Liabilities

$237,628

$215,548

$193,468

Total Liabilities

$385,817

$296,768

$293,410

Paid-in Capital

$30,000

$30,000

$30,000

Retained Earnings

($196,708)

($130,619)

($30,838)

Earnings

$66,089

$99,780

$141,276

Total Capital

($100,619)

($838)

$140,438

Total Liabilities and Capital

$285,199

$295,929

$433,848

Net Worth

($100,619)

($838)

$140,438

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8.6 Business Ratios

Business ratios for the years of this plan are shown below. Industry profile ratios based on the Standard Industrial Classification (SIC) code 2099, Food Preparation, are shown for comparison.

The following table outlines some of the more important ratios from the Food Preparation industry. The final column, Industry Profile, details specific ratios based on the industry as it is classified by the Standard Industry Classification (SIC) code, 2099.